In parts of the central United States, far from the population centers of the Eastern and Western seaboards, certain “winds of change” have been blowing for a quarter-century. What was little more than a whisper in the early 1980s has become a brisk breeze. Wind energy became the nation’s fastest-growing energy source in the 1990s, driven by technological improvements, favorable economics and public demand, particularly on the West Coast. The remarkable growth of wind energy production continues at an accelerated pace today.

Wind power, like solar, geothermal and other renewable energy sources, rose in popularity initially as a reaction to the oil crisis of the 1970s. The skyrocketing oil prices of the late 1970s, laws requiring local utilities to purchase power from alternative energy sources, and generous federal and state tax
credits designed to encourage the production of renewable energies led to an industry boom in the early 1980s. Investors rushed in and the technological basis was laid for the expansion of wind energy. In 1985, however, with the expiration of the then-available federal tax credit, the nascent industry fell largely dormant in the United States.

Using today’s technology, there is enough wind across the United States to supply the entire nation’s energy needs. Using wind energy, North Dakota alone could supply about one-third of the nation’s electricity.

While support for wind energy waned in the United States, Germany became interested in wind as an energy source. Coal and nuclear energy had been the backbone of German power generation for decades, but the effects of an overreliance on coal were beginning to show. The 1980s were marked in Germany by reports of acid rain and dying forests. Nuclear energy, championed in the 1970s as a clean and stable energy alternative to coal and oil, was called into question when, in April 1986, a meltdown occurred at the Chernobyl nuclear power plant in Ukraine. The effects of Chernobyl on the German population were tangible and rekindled discussion about renewable energy sources. Thus, wind energy arrived on the political agenda. Throughout the 1990s, interest in wind energy continued to grow as the problems created by global warming and ozone layer depletion became more apparent.

In response, the German government adopted an energy policy designed to reduce the country’s dependence on fossil fuel sources, provide an exit from nuclear energy and foster renewable energy sources. Encouraged by incentives, investors responded. In 1991, wind energy generation in Germany
totaled 100 megawatts (MW). Total installed capacity increased to 2,000 MW in 1997 and 18,000 MW in 2005. Wind power now accounts for more than five percent of Germany’s electricity production. With this growth developed an industry of tens of thousands of engineers, maintenance workers and wind turbine suppliers.

In 2008, with oil prices above $125 per barrel and for the first time exceeding (with an adjustment for inflation) the high set during the oil crisis of the 1970s, investors in the United States have taken note of the potential for wind energy. Using today’s technology, there is enough wind across the United States to supply the entire nation’s energy needs. Using wind energy, North Dakota alone could supply about one-third of the nation’s electricity. However, wind currently provides less than one percent of the nation’s electricity.

Nonetheless, in absolute terms growth in the production of wind energy in the United States has been staggering. Last year, more than 5,200 MW of wind energy was produced in the United States, expanding the nation’s total wind power-generating capacity by approximately 45 percent and representing an investment of more than $9 billon. The wind energy projects completed in 2007 account for 30 percent of the entire power-producing capacity added nationally that year. At the
end of 2007, the United State’s installed wind energy generation totaled nearly 17,000 MW. Wind energy now powers 4.5 million American homes, and the United States is poised to become
the largest producer of wind energy in the world. As a result of this tremendous growth, tens of thousands of new jobs were created, often in economically weak regions, such as the Central Plains and the Texas panhandle. The American Wind Energy Association (AWEA) estimates that at least 14 new manufacturing facilities servicing the industry opened in 2007.

While long-term growth is expected to remain strong, short-term growth is largely dependent on the timing and duration of an extension of the federal wind-power production tax credit, currently set to expire at the end of this year. In the past, expiration of the tax credit effectively halted all wind development until the tax incentive was readopted. Though wind power is cheaper than solar, geothermal and nuclear power, it cannot yet compete with fossil sources when accounting for debt service on investment, maintenance and the expense of leasing land. However, it is expected that wind power will become price competitive with fossil fuel sources within the next decade.

In addition to the federal production tax credit, a number of alternative federal, state and local programs are encouraging the further development of wind energy. Twenty-five states and the District of Columbia have adopted renewable portfolio standards (RPS), requiring that the energy portfolio serving a state or municipality include a certain minimum amount of renewable energy. A movement in support of a national RPS has begun. Supporters of a national RPS argue that the long-term predictability of an RPS will enable the industry to attract investment capital and achieve manufacturing economies of scale that will spur economic development, lower consumer prices, strengthen U.S. energy security and help the environment. Wind energy could receive a further
boost through mandatory carbon offset trading. Because wind energy is carbon negative, it could be used to neutralize carbon emissions generated by industrial processes.

The potential for investors in wind energy is boundless. European companies still enjoy a significant technological advantage over the relatively young American industry. There is a great potential for technology transfer. Indeed, joint ventures are being formed, applying German expertise and technology to build large wind parks in the Central Plains. Asian and European manufacturers are building plants in the United States to serve the growing local market. Early American wind parks are being refurbished to increase turbine efficiency five- to ten-fold. Year after year, billions of dollars
are being invested in an industry with long-term growth prospects, limited only by the amount of capital available to be invested. Wind energy is here to stay as a crucial part of the American energy mix.